Punch Taverns float resurfaces

Related tags Punch pub company Stock market

Punch Taverns, the parent group of the 4,300-strong Punch Pub Company, has made a dramatic U-turn, returning to the stock market only a week after it...

Punch Taverns, the parent group of the 4,300-strong Punch Pub Company, has made a dramatic U-turn, returning to the stock market only a week after it pulled its planned flotation.

The company scrapped its scheduled £680m initial public offering (IPO) on Wednesday just hours before trading was due to start.

Punch announced yesterday that it had raised £174m by placing shares with financial institutions and provisional trading will start tomorrow.

The shares have been valued at 230p against an original planned range of 250-300p. The reduced price will value the company at £570m as opposed to the higher anticipated £620-744m range.

It is understood the decision to resurrect the float so swiftly came owing to the level of enquiries that lead advisor Merrill Lynch received.

"People kept phoning up Merrills and saying they were surprised the float had been pulled," Punch told one national newspaper. "That got us thinking. We made just six calls to big institutions and immediately covered the placing. We then went into the market yesterday afternoon at 2pm and by 4.30pm we were three times covered.

"That demonstrates the appetite for the company."

The deal is seen as a lifeline to the struggling new issues market but some have suggested the move will be of some embarrassment to Punch and lead advisor Merrill who appeared to initially price themselves out of the market.

But some shareholders were not prepared to sell below 250p. As a result, Punch's free-float will be about 30 per cent against as much as 40 per cent previously.

"The irony is that they will probably trade up through the range and will end up where they wanted to be in the first place," said one City analyst.

In another change to the original plan, some of Punch's biggest investors including Texas Pacific, have decided to retain their entire holdings for the time being.

There had previously been some critcism that institutions were simply being asked to provide a high priced exit for Texas and Punch founder, Hugh Osmond.

The new offer will raise £160m, against £250m previously. Net proceeds for Punch will be the same. About £69m will be used to pay down loan notes. A further £15m will be used to reduce other debt, and £56m will provide additional working capital.

The lower price will result in reduced fees for the advisors. These will fall from £25m to £20m.

The company will begin trading on a price-to-earnings ratio of 9.5, a discount to its quoted rival, pub chain Enterprise Inns, on 10.4.

Related stories:

Punch pulls flotation (16 May 2002)

Pubcos hit back at FT-Punch story (15 May 2002)

Punch buys £15m White Rose (10 May 2002)

Punch Taverns' flotation draws closer (30 April 2002)

Punch announces intention to float (15 April 2002)

Punch to float in March (16 January 2002)

Punch Group intends to float despite turbulent market (28 Septemeber 2001)

Punch Retail prepares for flotation with new chairman (24 August 2001)

Related topics Punch Pubs & Co

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